Everybody knows that Australia is suffering from a severe housing shortage.
This is clearly illustrated in the rental market, where the vacancy rate has collapsed to a historic low:
Source: CoreLogic
It is also clearly illustrated in the next chart, showing that Australia completed only 174,000 homes in the year to September 2023, against a population increase of more than 620,000:
The reality of the situation is even worse than the chart presented above, since roughly 25% of new homes built over the past five years have merely replaced homes that have been knocked down, according to Housing Industry Association (HIA) chief economist Tim Reardon:
“Knockdown-rebuild currently account for one in four new homes built in Australia,” said Housing Industry of Australia chief economist Tim Reardon.
“As a share of the market they are going to be even stronger over the next years and we are seeing a rise in 2023 and 2024.”
As our populations have increased and cities become bigger our demolition numbers have been on the rise.
“What we’ve seen over the last 40 years is a consistent increase in demolition approvals, as we have had increasing density in our cities,” Mr Reardon said…
From March 2019 to March 2023, a total of 93,975 house demolitions were approved according to ABS data.
The countries most populous state, NSW, recorded the largest number of demolition approvals for houses with 33,691 recorded from 2019 to 2023…
Separate data from the Australian Bureau of Statistics (ABS) comparing net dwelling additions versus dwelling completions paints a less dire picture, with only 5% of homes completed taken up by demolitions over the past decade:
But this looks to be more due to a statistical quirk, which spiked net additions to the dwelling stock between 2020 and 2022 for no apparent reason (blue line above).
Even so, the above chart suggests that 94,000 homes were lost to demolition over the decade, as measured by the difference between dwelling completions and growth in the dwelling stock.
Regardless, the bottom line is that Australia needs to build far more homes than previously thought to make up for the homes lost to demolition.
This is especially so given the push for more housing density in our major cities, which requires detached houses to be demolished to make way for apartments and town houses.
